The World Economic Forum in Davos, Switzerland, is still going strong, and hotel company CEOs are braving the cold to get some airtime with CNBC. Namely, two of the biggest fugures in the industry: Hilton Worldwide CEO Chris Nassetta and Marriott International CEO Arne Sorenson, who has been making the rounds at Davos already. What, then, is on their minds?
Last year was a big one for Hilton Worldwide as the company announced plans to split into three distinct companies—a REIT (Park Hotels & Resorts), Hilton Grand Vacations and it's fee-based Hilton business.
"The market is trying to figure out the three new companies," Nassetta said. "Hilton, today, is a very different company than it was even two weeks ago."
Beyond that, the CEO continued, 2016 was one of Hilton's best years ever, not in the least because of the debut of its new Tru brand.
In 2016, Hilton signed 100,000 new rooms and started construction on 75,000, Nassetta said. "We added a hotel per day in the world last year." At the company's December Investment Day, Nassetta said that Hilton has 22 percent of all hotel rooms currently under construction globally. “Every one of our brand segments is setting records in terms of pipeline, and we're in our sixth consecutive year of growth in signings,” he said.
According to Lodging Econometrics, as of December 2016, Hilton Worldwide had 1,733 hotels in development with a total of 267,788 rooms. Of that total, the Hampton Inn brand lead the company’s pipeline with 478 hotels and 55,737 rooms.
2017 and Beyond
But that was then. What's ahead?
While acknowledging that there are "reasons for concern" in 2017, Nassetta is, overall, optimistic about the future. "As things settle down, it’s not going to be as bad as people think," he said. In terms of Trump’s position on trade, the CEO dismissed it as “an opening salvo.” Trump and his cabinet, Nassetta predicted, are not saying that they are not in favor of free trade. “They’re saying they want more balance to trade.”
"What we saw last year in our business, real time, was corporate America was very nervous for a whole bunch of reasons—what was going on in the election, what was going on with terrorism around the world—and they stopped traveling." With nearly 75 percent of Hilton's business coming from business travel, uncertainty in that sector can be devastating for a hotel company.
But now, he said, business travel is coming back. "Here’s my belief: The thing that drives demand in our business...is really non-residential fixed investment, which was going backwards last year. There’s an expectation that it’s going to go up this year."
American CEOs have a "more optimistic view," Nassetta said, with "some talk" of infrastructure spend and more investments. "All of those things portend good things. You're going to see optimism build a bit, you're going to see capital spending go up, you're going to see employment go up with that, and when you see those things happening, demand in hotel rooms go up."
Watch the full interview here:
Marriott CEO Arne Sorenson also spoke with CNBC, and expressed somewhat more reserved optimism for the future. The economy is growing, he acknowledged, but at a modest rate. Still, he said, there are “glimmers of hope,” but he did not seem confident that these glimmers would be enough to make a difference.
On the subject of trade, Sorenson said that new restrictions could make bidding on projects more difficult. “In a trade war, anything can happen. If we’re viewed as an American company, which we are, and somebody wants to do damage to an American company or the American economy, that could impact us.”
On the other hand, Marriott has about 6,000 hotels, and doesn’t own more than about 20 of them. “Every deal we do, we do with a local partner. Every hotel we have in China is with a Chinese real estate company. It’s not that simple to look at us and say, ‘You’re an American company and therefore we’re going to penalize you,’ because really, you’d be penalizing the Chinese real estate partner more than us in some respects.”